BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 1031


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          GOVERNOR'S VETO


          AB  
          1031 (Thurmond)


          As Enrolled  September 9, 2015


          2/3 vote


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          |ASSEMBLY:  |79-0  |(May 11, 2015) |SENATE: |33-6  |(September 3,    |
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          |ASSEMBLY:  |79-0  |(September 4,  |        |      |                 |
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          Original Committee Reference:  P.E., R., & S.S.




          SUMMARY:  Specifies that an employer who contracts with the  
          California Public Employees' Retirement System (CalPERS) for  
          health care coverage pursuant to the Public Employees' Medical  
          and Hospital Care Act (PEMHCA) is required to meet its  








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          obligation to provide any collectively bargained, statutorily  
          required or vested retiree health care contribution, which may  
          include reimbursement for Medicare Part B premiums, as  
          specified.  




          The Senate amendments are technical and clarifying.


          EXISTING LAW:  


          1)Establishes PEMHCA under the administration of CalPERS.  


          2)Requires a public agency that elects to participate in PEMHCA  
            to adopt a resolution and forward it to CalPERS.  CalPERS does  
            not currently collect, nor does it maintain records of  
            bargaining agreements between the employer and its employees'  
            exclusive representatives as they relate to health benefits.


          3)Provides the following three vesting options for contracting  
            agencies under PEMHCA:


             a)   A contracting agency could opt to make the employer  
               contribution amount equal for both active employees and  
               annuitants.  Under this option, an employee who retires and  
               meets the definition of annuitant becomes 100% vested and  
               receives an employer contribution amount equal to what the  
               active employees receive.


             b)   A contracting agency that joins PEMHCA on or after  
               January 1, 1986, has the option to temporarily pay a lesser  
               employer contribution amount for annuitants than for active  








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               employees provided the agency increases its contribution  
               for annuitants each year, over a 20-year period, until it  
               equals the agency's contributions for active employees.


             c)   A contracting agency has the option to establish a  
               pre-set "vesting schedule" which establishes specific  
               percentages of employer contributions based on an  
               employee's credited years of service.  Under this option,  
               an employee must have 10 years of CalPERS service, with at  
               least five of those years performed with the contracting  
               agency to qualify for a 50% employer contribution toward  
               annuitant health care, increasing 5% for each year of  
               service, until the employee is 100% vested at 20 years of  
               service.


          4)Provides for eligible annuitants to receive health care  
            coverage in any of the CalPERS basic health plans available to  
            active employees until they are eligible for Medicare,  
            whereupon they are able to enroll in Medicare and elect one of  
            the CalPERS coordinated Medicare health plans.


          FISCAL EFFECT:  Unknown.  This bill is keyed non-fiscal by the  
          Legislative Counsel.


          COMMENTS:  Medicare is a federal health insurance program that  
          covers individuals age 65 and older.  Medicare also covers some  
          individuals under age 65 with Social Security-qualified  
          disabilities and with End-Stage Renal Disease.  The Social  
          Security Administration (SSA) is the federal agency responsible  
          for Medicare eligibility determination, enrollment and premiums.  



          Medicare Part A is hospital insurance that helps pay for  
          inpatient hospital stays, skilled nursing facilities, hospice  








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          care and some home health care.  Retirees and their dependents  
          may become eligible for premium-free Part A at age 65 with a  
          work history of 10 years (40 quarters) with Social  
          Security/Medicare-covered employment, or through the work  
          history of a current, former or deceased spouse.  Individuals  
          that entered public employment prior to April 1, 1986, and were  
          not subject to Social Security, were not initially subject to  
          the Medicare tax, and are therefore not eligible for Medicare  
          Part A and B benefits without additional payments. 


          Medicare Part B is medical insurance that helps pay for  
          outpatient health care expenses, including doctor visits.   
          Individuals are responsible for paying the Part B premiums to  
          the SSA.  If an individual is receiving SSA benefits, the  
          premiums will be deducted from his or her Social Security  
          benefits.  


          CalPERS annuitants must have Medicare Part B in order to  
          participate in a CalPERS Medicare health plan.  Existing statute  
          requires CalPERS to reimburse State of California and California  
          State University retirees enrolled in a CalPERS Medicare plan  
          for all or a portion of the Medicare Part B premiums they pay on  
          behalf of themselves and their spouses.  This reimbursement  
          appears as a credit on the annuitant's benefit warrant. 


          According to the author, "If a firefighter, or any employee, who  
          is NOT in Social Security or Medicare and is covered by a  
          statute or agreement providing an employer paid post-employment  
          health care contribution, then the employer would directly pay  
          to the health plan the full premium cost or proportion thereof  
          as obligated by that statute or agreement.


          "However, if a firefighter is Medicare eligible and enrolled in  
          a Medicare Part A and B plan (as required by PEMHCA), the  
          Medicare Part B premium must be taken directly out of the  








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          firefighter's Social Security warrant.  Additionally, in cases  
          where the firefighter is in Medicare only then the retired  
          firefighter is directly billed for the Part B premium.  In these  
          cases, the firefighter should be reimbursed by the employer for  
          the amount of the Part B premium, or whatever amount is  
          consistent with the employer contribution obligation."


          "Because some firefighters participate in Medicare and others do  
          not, a disparity exists in the way that post-employment  
          healthcare premiums are paid.  In instances where a retiree is  
          promised a post-employment healthcare contribution from his or  
          her employer that would cover some or all of their Part B  
          premium, the retiree is entitled to reimbursement for that  
          obligated amount.  However, a problem arises when the employer  
          fails to provide that reimbursement."


          The author concludes, "AB 1031 ensures equal treatment of all  
          firefighter retirees under the Public Employees' Medical and  
          Hospital Care Act (PEMHCA) with respect to an employer's  
          participation in the payment of an annuitant's post-retirement  
          health care contribution."


          In the Fiscal Year 2015-16 state budget, the SSA is proposing  
          trailer bill language, to prohibit all state officers who are  
          eligible to receive benefits who are first appointed or elected  
          on or after January 1, 2016, and to prohibit all employees and  
          annuitants first hired on or after January 1, 2016, by the state  
          or a state entity, including, but not limited to the  
          Legislature, the judicial branch, and the California State  
          University, from being reimbursed for the cost of Medicare Part  
          B premiums for themselves or their enrolled family members, as  
          specified.


          GOVERNOR'S VETO MESSAGE:









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          This bill creates ambiguity and could be interpreted to expand  
          retiree health benefits by requiring local governments  
          contracting with the California Public Employees' Retirement  
          System to reimburse retirees' Medicare Part B premiums.


          These benefits should continue to be collectively bargained at  
          the local level, not imposed by the state. This is particularly  
          true, given the massive unfunded liability of state and local  
          retiree health plans.




          Analysis Prepared by:                                             
                          Karon Green / P.E.,R., & S.S. / (916) 319-3957    
                                                                    FN:  
          0002498